The themes of transformation and employment in the renewable-energy sector have started to eclipse traditional concerns over cost and reliability following government’s highly contested, and much delayed, decision to press ahead with the signing of agreements for another 27 renewable-energy independent power producer (IPP) projects.
The projects, which have a combined capacity of 2 300 MW, bring to 112 the number of IPPs procured under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) since 2011.
To date, 6 422 MW of renewables capacity has been procured, with 3 773 MW, from 62 IPPs, currently in operation. The combined investment across all projects is greater than R200-billion, of which R48.7-billion has come in the form of foreign investment.
Notwithstanding some last-minute drama involving Eskom’s legal authority to sign on April 4, Energy Minister Jeff Radebe confirmed during a Power FM radio interview the following day that all the agreements had been signed by 23:30.
Should all the projects reach financial close, the agreements will open the way for investments worth R56-billion across mostly rural sites in the Northern Cape, Western Cape, Eastern Cape, Free State and Mpumalanga. In the process around 60 000, mostly construction jobs will be created as 12 solar photovoltaic (PV) and 12 onshore wind projects are build, along with a concentrated solar power facility, a mini-hydro plant and a biomass facility.
Nevertheless, opponents continue to view the projects as a threat to both jobs and government’s stated commitment to addressing South Africa’s racially skewed economic and corporate landscape.
Therefore, issues of employment and empowerment are set to become key features of any future REIPPPP bid windows, particularly in light of falling technology costs, particularly for solar PV and wind, as well as a growing acceptance globally that the risks associated with the integration of variable renewable-energy plants can be mitigated cost effectively.
The National Union of Metalworkers of South Africa (Numsa) – which sought, and failed, to interdict the IPP signing – has indicated that it is engaging with its lawyers to assess what other legal options are available to block the projects. In an interview with SAfm spokesperson Phakamile Hlubi-Majola stressed the court had struck the case from the roll, not on its merits, but owing to it no being considered urgent. However, she also did not rule out “mass mobilisation”.
Numsa maintains that the conclusion of these IPP contracts could be “disastrous for workers and their families”, with the union citing a figure of 30 000 potential job cuts. The figure, Hlubi-Majola said, was based on a statement made by then acting Eskom CEO Matshela Koko, who, in explaining the utility’s unwillingness to conclude further renewables PPAs, indicated that the projects would result in the closure of four power stations.
The National Union of Mineworkers (NUM) expressed anger at the signing of the contracts, which it described as an insult to the working class and the poor.
The NUM warned that it would desist from supporting the governing African National Congress and would “not continue to vote and support an organization which is taking away jobs from the poor, arguing that the IPPs placed 40 000 jobs at risk in the mining and energy value chain.
“We cannot perpetually campaign and vote for the so-called ‘New Dawn’ as narrated by Cyril Ramaphosa.”
Radebe insists the renewable-energy projects are not the main threat to coal-sector jobs. Instead, employment in the sector is threatened by the fact that several mines and power stations are approaching the end of their economic lives.
Likewise, the South Africa Photovoltaic Industry Association (SAPVIA) and the South African Wind Energy Association (SAWEA) argued in their reaction to the conclusion of the contracts that the renewable-energy projects were an employment and skills opportunity.
SAPVIA programme manager Niveshen Govender said the projects associated with bid windows 3.5 and 4 of the REIPPPP will fast-track the delivery of employment opportunities and industrialisation opportunities.
SAWEA CEO Brenda Martin argued that South Africa’s manufacturing and construction industries stood to benefit immediately from the conclusion of these PPAs, as equipment orders could be placed and construction contracts concluded.
“The recovery of the domestic manufacturing industry is necessitated by the effects of the delay which saw several manufacturing facilities having to retrench staff due to a lack of further component orders. Growth of this industry is particularly critical, given its potential to attract further investment, create significant numbers of jobs and drive down the price of locally available technology,” Martin added.
Radebe argues that 1 500 jobs could be created in the domestic manufacturing sector, owing to local-content requirements associated with the installation of 2.8-million solar PV modules, 600 inverters, 385 transformers and around 500 wind towers and turbines.
Likewise, there are lingering misgivings about whether the IPPs could undermine South Africa’s transformation efforts.
Sensitive to these sentiments, Radebe used his speech at the signing event in Centurion to call for stakeholders to develop, and commit to, an Energy Transformation Charter.
Such a charter would seek to embed opportunities for black South Africans in what the Minister views as a growing renewable-energy sector. He also wants new and innovative funding models to be crafted to facilitate greater equity participation by black South Africans in a growth sector.
Describing the latest 27 projects as only the start of a larger renewables journey, the Minister highlights the National Development Plan’s objective of building 20 000 MW of renewable-energy capacity by 2030. This will be supported by an updated Integrated Resource Plan, which will be “finalised very soon”.
“Finding innovative and affordable funding mechanisms for the participation of black entrepreneurs in this space, will allow the development of black industrialists as well as ensuring participation of black entrepreneurs in the mainstream economy. This should be a priority going forward,” he added, while stressing that the transformation agenda should not have a substantial negative impact on the price of electricity.
Again, the industry associations expressed a willingness to embrace government’s transformation agenda, with SAPVIA chairperson Davin Chown saying the solar industry remains committed to engaging with stakeholders in building an energy future that is “participatory” and “transformational”. SAWEA’s Martin also reaffirmed the wind industry’s commitment to “ongoing social, environmental and economic development”.
IPP Office head Karen Breytenbach said that, besides energy, the procurement process had insisted on both higher levels of domestic and black ownership, as well as socioeconomic development, than projects procured in previous bid windows.
South Africans own 57.8%, or R11.9-billion, of the companies awarded projects during bid windows 3.5 and 4. Of that, black shareholders own 64.2%, or R7.64-billion.
Nevertheless, as the cost of technologies such as solar PV and onshore wind continue to fall globally, the IPP Office is likely to insist on even higher black ownership in any future rounds. It will also push harder, Breytenbach indicates, on ensuring that there is greater black business participation in the construction, operation and maintenance of the renewables fleet.
This shift in emphasis is likely to come to the fore once DoE moves to procure the unfortunately named ‘expedited round’ of projects, which were bid in 2015, but never officially procured.
Radebe confirms that government is considering the expedited projects, with a combined capacity of 1 800 MW, but says whether they proceed will depend on securing a win-win deal based on prices, economics and value for money.
Breytenbach says the projects are likely to take some time to materialise and hinted that much could depend on the wiliness of the bidding IPPs to match government’s expectation on affordability and transformation.